The glass industry of pakistan

Glass industry is one of the few industries which is still showing positive figures in the current economical crisis of Pakistan, where every other industry is facing the economical crunch. Having a strong local market of seven to nine billion and also creating its presence in international market now, the Pakistani Glass industry can be divided into three major divisions which are pharmaceuticals, food & beverages and construction. . Looking at the Porters model, we would analyze that how Ghani Glass meets it opportunity and threats in the organization’s external environment. 

            When an industry is emerging, the barriers to entry can be medium to low. On the other hand for an established industry, the barriers to industry will be high to very high. Even with the continuously increasing product demand and growth of glass industry, still it’s not an easy ground for the new entrants as it has got high setup costs associated with it. Glass industry is very much of an established industry meaning that the barriers to entry are high to very high because of the following reasons; Customers have little brand loyalty, Products provided are not unique, Switching costs are low, Production process is easily learned, Access to inputs is easy, Access to customers is easy, Capital and Technological requirements are high.

The following buyer supplier matrix portrays who has how much power in business negotiation.

Buyers Importance in Suppliers Customer Base Low            Medium      High	Buyer monopsony Power	Negotiating Power favors Buyer	Alliance/ Mergers/ Complex Negotiations
	Higher Buyer Power	Frequent Negotiations Biz-Dev Contacts	Negotiations Power Favors Suppliers
	Pleasant Relationships Simple Contacts	Higher Supplier Power	Suppliers Market Power
	Low                       Medium               High Suppliers Importance in Buyers Supply Chain

            Ghani Glass because of its established position in the industry has got comparatively good bargaining power against both the buyer and the supplier.

            Looking at them separately, the bargaining power of suppliers is medium because some of the supply chain is controlled by the Ghani group as they also deal in the mining business silica. 40% of the silica supplies come from there own mines and the other 60% percent is supplied by the other suppliers. Some of the chemicals being used in glass manufacturing are supplied by ICI Co. in return for supplying ICI with salt.

On the other hand the bargaining power of the buyers is medium due to the fact that

·         There is a concentration of buyers and these buyers buy in large volumes

·         The product is undifferentiated and can be easily replaced by substitutes

·         Switching to an alternative product is relatively simple and does not require high costs 

·         Customers have access to market information for evaluation.

            Though the current economical crisis is not affecting the glass industry by much but the recent continues power outages has surely affected the production. This has further decreased the supplies despite the fact that the demand for glass products is increasing as new beverage and pharmaceutical companies are also expanding their businesses and their products are dependant on the glass industry.

            As there is an increasing demand for glass products and shortening of supplies, the industry is now moving towards acquisitions, mergers and research & development to coop up with the increasing demand.

            Threat of substitutes exists if there are alternative products with comparatively low prices and better performance parameters. For Ghani Glass products, major substitutes are plastic bottles and Tetra Pack. Both of the substitutes have a relatively there own specific market share which is not affecting the Ghani glass by much.

Plastic bottles are low in demand because of the safety issues and its shorter life span, on the other hand Tetra Pack products due to its seven layer packaging though are safe but they are expensive too.

            High competition result in fluctuating prices and low profit margins in the industry. For Ghani glass the local competitors are Murree, Baluchistan, Prince, Khawaja and BGL. Internationally Germany is the lead runner in glass manufacturing industry because of their lead in technology and availability of technical expertise. This high degree of rivalry is due to exit barriers, industry concentration, fixed cost/value added products and also the customer can easily switch between products

            The market for these glass products has now moved from the seller’s market the buyer’s market as there has been an increase in buyer companies as compared to glass manufacturing companies. Another aspect of these markets is that in Pakistan most of the market is of price conscious consumers, this is the reason that why the glass manufacturing companies of Pakistan is not adhering to the quality issues. In result, for the quality conscious markets like construction glass products and glass decorative, all of the glass products are being imported from the European countries. In addition to that the government has also reduced the import taxes for these glass products which have further raised concerns for the local glass industry.

            The Pakistani glass industry has limited itself to a very narrow market due to its high technological requirements, but there are many other untapped markets too which the industry can look into like glass tubing, glass used in electronics (monitor and TV screens), heat resistant glass, fiber glass and laminated safety glass.

Company Profile

History of Ghani Group

            Ghani Group of companies was founded by Sheikh Abdul Ghani in 1963. The origins of this group can be found in the mining industry as per its involvement in coal, salt and sand mining since 1959. It evolved to become the leading manufacturer of glass in Pakistan with a reputation for unrivaled excellence in the standards of glass products and services. Today, Ghani Group is running a diverse range of businesses including three glass plants, an automobile plant, number of leading mining companies, one textile unit, and trading houses and has an annual turnover of over Rs 8 Billion. Ghani Group ventured into the glass manufacturing through Ghani Glass Limited. Ghani Group was not new to the glass manufacturing industry. They had been supplying silica sand to the glass industries four decades back. The chosen manufacturing field was glass manufacturing due to the robust demand for glass products in the country.

Ghani Glass

            Ghani Glass Limited is a public limited company, incorporated on December 31, 1992. The company is engaged in the business of manufacturing and sale of glass containers and sheet glass of different types. The company is the premier supplier of glass products and has a market share of over 85% in Pakistan. It exports to around 12-26 countries world wide and has gone for merger with Kaasaf Ul Musaffa, a Dubai based company.

            Through continuous development in innovation, expansion and quality focus, Ghani Glass is leading the glass industry with a total turnaround of over 2.0 Billion Rs annually.

Mission:

            Mission is to be successful, by effectively and efficiently utilizing our philosophies, so that we achieve and maintain constantly the high standards of product quality, advanced techniques and customer satisfaction.

Vision and Philosophy

"Nothing in this earth or in the heavens is hidden from Allah"

To indulge in honesty, integrity and self-determination, to encourage excellence in performance and most of all to put our trust in Allah, so that we may, eventually through our efforts and belief, become the leaders amongst glass manufacturers of South Asian Countries.

Location

            Its manufacturing facilities are located in three provinces:

• NWFP - Ghani Glass Limited, Hattar (GGL-I)

• Sindh - Ghani Glass Limited, Karachi (GGL-II)
• Punjab– Ghani Glass Limited, Sheikhupura (Float Glass Plant)

Market share

            Ghani Glass Limited is the leader of glass manufacturers of the country as it captures over 85% of market share. It also has international reach over 12 countries. The production of GGL-I, GGL-II combined is 110,000 tones per annum and of GGL3 (Float Glass Plant) is 100,000 tones per annum.

Business divisions

            The production facilities of the company are divided in two major divisions:

Float glass division: During the year 2007, the division introduced two new categories of glasses in its product line, Green float glass and Brown float glass.

Container glass division: The division catering beverages and Pharmaceutical industry has achieved significant growth in the market share in the beverage industry along with already being a leader in the Pharmaceutical industry.

To formulate any strategy, you have to first look into different internal and external factors for an organization and the industry as well.

Internal Profile Matrix

Description of IFE

            For any organization to capitalize on an opportunity, it needs to look for quality and efficiency in all its operations. Thus technology plays a vital role in improving business processes and their operations. This could be only possible if the management of the organization is aimed to follow these benchmarks, tries to make a footprint in the industry in the form of high market share and creates awareness about the practical implementations in the organization. For this an organization has to be financially strong. The weights as shown in “Exhibit ” are assigned on the bases of above stated considerations. Ghani Glass Co. is strong on most of these grounds and its major strengths include financial strength, quality products and technology indicated by the rating 4. But the company is not pursuing policies and practices which could suit their employees. In result the organization’s major weaknesses are on issues like salaries, turnover rate and hiring of technical experts. As a result, Ghani Glass Company is just above an average in it’s over all internal strength, concluded from the total weighted score of 2.75.

External Profile Matrix

Description of EFE

As we can see from “Exhibit ” that technical up-gradation, expansion, competent staff, quality and lack of system are the most important issues that are effecting the glass industry, as indicated by the weight of 0.15 for technical up gradation and 0.1 for the rest of the above mentioned factors. Ghani Glass’s current strategies are encapsulating issues like technical up-gradation, expansion and quality as indicated by the rating 4, 4 and 3 respectively. Also Ghani Glass Co. is not pursuing any policies and practices to attain and retain its competent work staff, as indicated by 2. Despite the organization’s weak HR policies, the total weighted score of 2.9 indicates that Ghani Glass is above average in its efforts to pursue strategies that capitalize on external opportunities and avoiding threats.

Competitive Profile Matrix

Description of CPM

            From “Exhibit ”, we can see that an organization’s financial position is of key importance as it also leads to the strength of other key factors. Ghani Glass’s financial position is very strong as compared to the financial position of its competitors which are Murrey Burry and Balochistan Glass Ltd. So Ghani Glass has the competitive advantage of being financially strong. There are certain other important critical success factors like market share, availability of resources, cost structure, production capacity and technology. Ghani Glass Company is strong on most of these factors, as shown by a total weighted score of 3.145 which is more than that of BGL and Muree Burry scores of 2.42 and 2.145 respectively.

           

After the evaluation of several internal, external and competitive factors, different types of matrices are used for the matching stage to come up with different strategy options.

SWOT Matrix

            In SWOT analysis shown above, a comparison is done for the organization strengths, weaknesses, opportunities and threats.

Strengths VS Opportunities

            By comparing organization’s key strengths (financial strength, labor force, good relations with suppliers, state of the art technology) with its key opportunities (growing local and international market and innovation). Leads to three different strategic options of:

1. Diversification
2. Market development
3. Product development

Strengths VS Threats

            To overcome the weaknesses (growing market can attract competitors, loss of key staff, supply less than demand, government policies, substitutes, power tariffs, increase in cost of raw materials) Ghani Glass will have to capitalize on their key strengths of financial strength, educated management, state of the art technology and production capacity. This leads to an option of retrenchment strategy for Ghani Glass.

            Apart from this, Ghani Glass will also have to work on the policies of improving their incentive system to reduce the loss of key staff in their organization.

Opportunity VS Weaknesses

            Ghani Glass will have to avail the opportunities (growing local and international market, innovation, technical up-gradation and increasing preference for quality products) to minimize its weaknesses of poor salary and reporting structure, turn over rate, accountability and lack of technical expertise.

            For this Ghani Glass will have to work on the policies of career progression and improving the reporting structure.

Weaknesses VS Threats

            Ghani Glass will have to minimize its weaknesses of high running cots and lack of expertise, to reduce the effects of threats like increase in cost of raw material, unstable government policies, power tariffs and new competitors.

Space matrix

           

            Space Matrix compares the internal and external dimensions for an organization to evaluate the strategic direction it should follow. These internal and external dimensions include financial strength, competitive advantage, industry strength and environmental stability, respectively.

           

            According to the directional vector (2.05, -0.2), Ghani Glass lye in competitive quadrant indicating competitive strategies. These competitive strategies include backward, forward, horizontal integration, market penetration, market development, product development and joint ventures.

GRAND MATRIX

	Rapid Market Growth
Weak Competitive Position	Quadrant II Market development market penetration product development horizontal integration divestiture liquidation	Quadrant I market development market penetration product development forward integration backward integration horizontal integration concentric diversification	Strong Competitive Position
	Quadrant III retrenchment concentric diversification horizontal diversification conglomerate diversification Divestiture liquidation	Quadrant IV concentric diversification Horizontal diversification conglomerate diversification joint ventures
	Slow Market Growth

            Grand Matrix shows the options of strategies which Ghani Glass can follow concerning its current industrial scenario through the comparison of market growth and competitive position.

            According to our analysis, Ghani Glass Company falls in quadrant 1 according to its strong competitive position and rapid market growth of the industry as encircled in the above figure. And can follow the strategies mentioned in quadrant 1.

               Ghani Glass can further increase its revenue by 100% if it tries to utilize its financial position to the fullest potential. In the next three years Ghani Glass can look for new markets not only by geographical areas but also by developing new related glass products. For that rigorous R&D by attaining expertise can help Ghani Group increase its customers in both local and international markets with its new glass products.

               Also continuous research and development regarding production processes will help Ghani Glass in its cost cutting, better profit margins and decreasing the effects of increasing utility expenses in the coming years.